It’s an election year again. Every four years in the United States, we the people get a say in who will lead this great nation. It’s what’s known as the election cycle. The right to vote isn’t afforded to everyone globally, and it shouldn’t be taken lightly. That’s especially true when you take a look at what’s going on in the world today.
The COVID-19 pandemic has killed over 200,000 Americans and devastated the United States and global economies. The Federal Reserve has forgone any tightening of monetary policy, bolstering markets. Yet stimulus for those in need still seems to be far from reality.
At the same time, civil unrest and protests have broken out across the United States, fueled by a decades-long racial divide that seems to be tearing the nation apart. This election is one of the most important elections in the history of the United States.
The presidential election will determine many things. It will determine the direction the country takes in terms of health care, racial inequality, trade — both in the United States and with trade partners around the world — and much, much more.
Another big result of the coming election will have to do with the stock market. Different classes of stocks will rise and fall in the event of a win by President Donald Trump than you would see in the event of a Vice President Joe Biden win. The bottom line is that the stock market will be directly affected by the election outcome.
Presidential Elections Are Known for Moving the Stock Market
Many economists and analysts believe there’s a strong correlation between the election cycle and the performance of the U.S. stock market. The reason is simple. The head resident of the White House is a major determining factor in terms of policy in the United States. That’s the case for economic policy, health care policy, environmental policy, and any other policy in the United States.
Policy changes will naturally have an impact on the industries they are geared toward. For example, the Trump administration recently announced an executive order aimed at speeding the permitting process at the Environmental Protection Agency. As a result, the mining sector saw tremendous gains.
Every presidential candidate, whether running for reelection or seeking their first term in office, has their own view of how the country should be run. Those views will generally equate to quite a bit of volatility in the stock market when the winner of the November election is announced. With Election Day on the horizon, now is the time to start preparing for a post-election portfolio adjustment depending on who wins the White House.
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Stocks to Buy if Donald Trump Wins (Republican Nominee)
If President Donald Trump wins the election, there are a few major factors to think about. First and foremost, the trade war between the United States and China will likely continue. Moreover, Trump isn’t a favorite on the geopolitical stage, nor is he popular among the protestors in the U.S.. As a result, defense and military contractors could be strong plays. This is no surprise, as defense plays are always strong under Republican leadership.
Moreover, Trump’s policy is largely centered around bolstering industry and manufacturing in the United States. As a result, industrial stocks, miners, and energy producers would all benefit from the president winning a second term.
Considering these key factors, here is a list of the best stocks to buy if Trump wins reelection:
Lockheed Martin (NYSE: LMT)
Lockheed Martin is an interesting investment. As a traditional defense play, the company profits from misery. Ultimately, where there is war, civil unrest, or any perceived threat to the stability of the United States, Lockheed Martin sees a potentially profitable opportunity.
Since the beginning of Trump’s presidency, the Republican leader has talked about changing inequalities in foreign trade. This has led to geopolitical concerns between the United States and China that have only been heightened since the start of the coronavirus pandemic.
If Trump wins reelection, geopolitical tensions between the United States and China, as well as around the world, will likely continue.
The stock only becomes more attractive when you consider the current social unrest. Defense companies tend to do well in the face of civil unrest, and the protests aren’t likely to get any quieter if the current administration is reelected to another four years in office. All in all, if President Trump wins a second term, Lockheed Martin and other defense stocks are likely to continue to experience strength.
Caterpillar (NYSE: CAT)
Caterpillar is one of the largest construction and mining equipment manufacturers in the world. If you drive past a construction site in the United States, there’s a good chance that you’ll see one of the company’s branded tractors.
Throughout Trump’s original campaign and his reelection campaign, there have been two key messages that bode well for Caterpillar if the president wins reelection:
- The Border Wall. One of the president’s early campaign promises was to build a wall between the United States and Mexico. This is a massive undertaking that requires quite a bit of construction equipment to complete. As a result, the building of the wall bodes well for Caterpillar.
- Domestic Materials Independence. Trump recently signed an executive order to speed up the permitting process for companies that mine key basic materials. As such, the mining industry will continue to benefit from a Trump reelection, and, if it takes place, Caterpillar will likely see further gains.
The New York Times (NYSE: NYT)
This is likely a shocker for those who have followed Trump and his interactions with the massive New York-based publisher. Throughout his original campaign, his presidency, and his campaign for reelection, Trump has been at odds with the New York Times.
So, why would a Trump reelection win be a good thing for the Times?
As they say in show biz, any press is good press. If Trump wins a second term, the New York Times would likely publish content that the Trump administration doesn’t agree with.
Considering the temperament of our current president, this would lead to a slew of messages from Trump surrounding the New York Times and fake news. Again, any press is good press. When consumers see Trump bashing content on the New York Times, they’re going to want to visit the website to find out what the big deal is surrounding the content.
Moreover, during uncertain times, consumers often look to credible resources to get an understanding of exactly what’s happening. Readers looking for credible reporting in an era rife with distrust in the media could explain why the New York Times saw a large subscription increase following Trump’s 2016 win.
With widespread distrust in many other sources of information, uncertainty surrounding the direction of the United States, and the New York Times’ long history of reliable reporting, a stronger viewership for the publisher can be expected in the event of a Trump win, which turns into revenue and profit growth.
AT&T (NYSE: T)
Finally, AT&T shows serious promise if Trump wins reelection. The reason has to do with the fact that the Trump administration and China are at odds. Believe it or not, the disagreements go far beyond economics. In fact, the United States and China are in a technology race.
That’s where AT&T comes in.
AT&T has been working on 5G technology for some time. If all goes well, 5G will be the latest and greatest in wireless connectivity. Of course, to continue to show technological strength over China, the United States will need to roll out 5G faster and more successfully than China.
AT&T has the ability to do just that. If Trump wins reelection, the Trump administration will likely place a high level of importance on AT&T’s work in the rollout of 5G connectivity, leading to political and regulatory benefits for AT&T in the process.
Stocks to Buy if Joe Biden Wins (Democratic Nominee)
Former Vice President Joe Biden lives on the other side of the equation. Throughout his campaign, Biden has pointed to changes he would make to improve health care, reduce the carbon footprint in the United States, and reduce social inequalities across the country.
Biden also plans on overhauling individual and corporate tax codes, making high-income earners pay a larger share of the overall tax burden.
Biden has also pointed to improvements in United States infrastructure as an opportunity to increase jobs in the country.
With all of these factors in mind, some of the best stocks to buy if Biden wins a spot in the White House include:
Union Pacific (NYSE: UNP)
Union Pacific is a massive infrastructure-related company in the United States. In particular, the company is a railroad holding company most well known for its ownership of Union Pacific Railroad.
If Biden wins on election day, we’re likely to see moves to expand and strengthen infrastructure in the United States. This has the potential to lead to both financial and regulatory support for those operating in the infrastructure sector.
Union Pacific is one of the strongest plays in infrastructure today, and would be a clear beneficiary of a Biden win. Moreover, with a strong performance throughout the COVID-19 pandemic, Union Pacific offers up a level of resiliency not seen among its competitors.
NextEra Energy (NYSE: NEE)
Throughout his campaign for the White House, Biden has touted the importance of changing the way the United States and its allies around the world produce energy. Ultimately, climate change is a hot topic, and Biden plans to tackle the issue directly.
With that in mind, NextEra Energy would be a natural beneficiary of a Biden win. The company is one of the largest utility companies in the world, which offers up a level of strength and stability that traditional investors enjoy. Beyond that, NextEra Energy has been incredibly active in the clean energy industry, an industry that would likely receive incredible support if Biden wins on election day.
At the moment, there is no other utility company in the world that produces anywhere near as much clean energy as NextEra Energy. The company derives this energy from solar and wind farms across the United States. If Biden takes the win, most clean energy stocks on Wall Street will see gains, but NextEra Energy has the most long-term potential to benefit from a Biden presidency.
Intuit (NASDAQ: INTU)
Biden has pledged to turn the tax code as it stands on its head if he wins the White House. The idea is to make high-income earners pay a higher tax rate while giving low-income earners and the middle class tax cuts.
With all of the changes that are expected to take place with the tax code if Biden wins on election day, tax prep companies are going to take center stage for the investing community. In this arena, Intuit is a clear winner.
Intuit is the founder and owner of QuickBooks, along with a long list of other popular accounting software. As a result, the company would likely see a strong increase in investor interest if Biden takes the White House.
Barrick Gold (NYSE: GOLD)
Finally, Biden has pledged to increase government spending on infrastructure in an attempt to spur economic growth across the country. However, increasing spending is a double-edged sword.
Sure, increases in infrastructure spending under a Biden administration would lead to improved job and spending figures. On the other hand, spending increases would also lead to increases in the federal deficit.
Throughout history, gold prices and the federal deficit have been heavily correlated. As the deficit grows, gold prices tend to follow. If Biden wins the November election, spending increases and growth in the federal deficit will likely lead to increasing gold prices, which would be great news for Barrick Gold and its investors.
Pro tip: If you’re going to add stocks to your portfolio post-election, make sure you choose the best possible companies. Stock screeners can help you narrow down the choices to companies that meet your requirements. Learn more about our favorite stock screeners.
There’s no question that the election results will play a role in market movement in the weeks, months, and years following election day. Whether Democrats or Republicans take the White House, changes in policy are to be expected, and that will result in volatility in the stock market.
It’s possible to profit from this market volatility, but volatility in the stock market can also equate to losses. As a result, it’s important to make educated investment decisions when injecting your hard-earned money into financial markets.
As a result, before you make any investment decisions, be sure to thoroughly research the potential risks and potential rewards associated with your investment.
If Trump wins reelection, Wall Street will likely flood to defense, building equipment, and technology stocks. If Biden wins, investors are more likely to pour their money into clean energy, tax and accounting, and gold stocks. But that doesn’t mean blindly picking stocks in these respective categories following a Trump or Biden win is a good investment decision.
When making investments following election day, these categories should be used as a guide, but you should always perform detailed due diligence prior to making any investment decisions in order to avoid potentially significant losses.
What stocks will you buy if Trump wins the election? What stocks will you buy if Biden wins the election?
Disclaimer: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.